The International Monetary Fund is making it easier for strong European economies to tap the fund in case the Eurozone debt crisis threatens their liquidity.
The move, which was approved Monday and disclosed Tuesday afternoon (New York time), replaces the fund's Precautionary Credit Line with the more flexible Precautionary and Liquidity Line, which can be used as insurance against future shocks and as a short-term liquidity window to address the needs of crisis bystanders during times of heightened regional or global stress and break the chains of contagion, the IMF said in a statement.
The new facility provides six-month loans and could be used under a 12- to 24-month arrangement with access up to 1,000 percent of a member's quota.
Eurozone leaders have yet to make progress in their fight against the two-year-old Eurozone sovereign debt crisis, which now threatens France's credit rating. During the last two years eight Eurozone member states have had changes of administration and yields on government bonds have skyrocketed.
The purpose of the changes is to respond better to the diverse liquidity needs of members with sound policies and fundamentals, including those affected during periods of heightened economic or market stress --the crisis-bystanders -- and to address urgent financing needs arising in a broader range of circumstances than natural disasters and post-conflict situations previously covered, the IMF said.